FOREX Trading Strategies

The world of trading and investment can be as frustrating as it can be rewarding! And Forex (Foreign Exchange) is no exception — often described as risky, profitable and complicated.
Forex is the largest trading market in the world.read more....

Forex is the worldwide market for buying and selling currencies. These markets were developed to cater for the supply and demand of different currencies by governments, companies and individuals — for international trade and assisting importers and exporters.
Therefore those who trade in this market include consumers, businesses, investors, speculators and the banking industry.for more informations....

Different countries use different currencies — which vary in their values against each other. Forex trading invovles the buying and selling of two currencies — trading pairs — you are selling one and buying another eg you may use the US dollar to purchase British pounds — if the supply of the pound lessens — it will cost more dollars to buy pounds — the Forex trader hopes to sell their pounds at a higher price than the purchase price.
A speculator in Forex is someone who accepts the possibility of adverse exchange-rate movements in the hope of making a profit from favourable movements in currency.
As a speculator you should always start trading with a small amount and have a trading system — which tells you when to get in and out of the market. It is a favourite option for currency traders as you can trade the Forex market 24 hours per day and the transaction costs are minimal. learn more....

This market — because of its sheer size — is hard to be manipulated — which stocks can be — it is more likely to be influenced by global news or events. Hence, the opportunity for 'insider trading' is eliminated.
However — beware -Forex brokers estimate that 90% of traders lose their money; 5% break even and only 5% achieve profitable results! ....read more.........

The Worst Forex Trading Strategy Ever That You Might Be Using

You may be wondering, `Why would Forexgen write about the worst Forex trading strategy around?`

There are a couple of reasons:

First, to warn you about the worst Forex trading strategy, because you really don`t want to end up using this system.
Second, because once you know the worst possible Forex trading strategy, the one that is designed to maximize your losses over the long run, then you can reverse it to craft a strategy which does the exact opposite.

With what you learn from the worst Forex trading strategy, you will be able to create a system that will produce some tremendous long-term gains. The worst Forex trading strategy I`m referring to, which is simply the worst Forex trading strategy I have ever encountered, is known as averaging down. This horrifying Forex trading strategy is the process of buying more shares that you had previously acquired, as the price drops.learn more....

Traders often purchase shares this way in an effort to reduce their initial entry price.
Only bad investors average down by buying shares of a sinking assests to decrease their overall average price per share. This Forex trading strategy is hardly ever effective, and is often like throwing good money after bad. It also magnifies a trader`s loss if the share keeps dropping. Remember, just because a share is cheap now that doesn`t mean it`s not going to get any cheaper. However, let`s examine how this devastating Forex trading strategy works. Say you bought one thousand shares at $40. for more informations.....

The novice investor may not have a stop loss in place, and the share price falls to $30 dollars. Here comes the stupidity of this Forex trading strategy — to average down the novice trader might by another thousand shares at $30 to lower the average cost per share that he`d already purchased. So, his average cost per share would now be $35.
Unfortunately, the share price may fall even further, and the novice trader will again buy more shares to reduce the average cost per share. They end up buying more and more into a share that`s losing their money.

Now, imagine this Forex trading strategy being applied to a portfolio of assets. In the end, all the capital will automatically be allocated to the worse performing assets in the portfolio while the best performing assets are sold off. The result is, at best, a disastrous underperformance versus the market.
If a trader uses an averaging down system and uses margins, their losses will be magnified even further. The biggest problem with this Forex trading strategy is that a trader`s gains are cut short, and the losers are left to run. My advice is — never average down.read more...

Choosing A Forex Strategy

Technical analysis and fundamental analysis are the two basic areas of strategy in the FOREX market which is the exact same as in the equity markets. However, technical analysis is by far the most common strategy that is used by individual FOREX traders. Here is a brief overview of both forms of analysis and how they directly apply to forex trading:
Fundamental Analysis
If you think it's hard enough to value one company, you should try valuing a whole country instead. Fundamental analysis in the forex market is often an extremely difficult one, and it's usually used only as a means to predict long-term trends. However it is important to mention that some traders do trade short term strictly on news releases. There are a lot of different fundamental indicators of the currency values released at many different times. Here are a few of them to get you started:
* Non-farm Payrolls
* Purchasing Managers Index (PMI)
* Consumer Price Index (CPI)
* Retail Sales
* Durable Goods
You need to know that these reports are not the only fundamental factors that you have to watch. There are also quite a variety of meetings where you can get some quotes and commentary that can affect markets just as much as any report. These meetings are often brought out to discuss any interest rates, inflation, and other issues that have the ability to affect currency values. read more......
Even changes in how things are worded when addressing certain issues such as the Federal Reserve chairman's comments on interest rates; can cause a volatile market. Two important meetings that you have to watch out for are the Federal Open Market Committee and Humphrey Hawkins Hearings.
Just by reading the reports and examining the commentary, it can help FOREX fundamental analysts to get a better understanding of any and all long-term market trends and also to allow short-term traders to be able to profit from extraordinary happenings. If you do decide to follow a fundamental strategy, you will want to be sure to keep an economic calendar handy at all times so you know when these reports are released. Your broker may also be able to provide you with real-time access to this kind of information.
Technical Analysis
Just like their counterparts in the equity markets, technical analysts of the FOREX trading market analyze price trends. The only real difference between technical analysis in FOREX and technical analysis in equities is the time frame that is involved in that FOREX markets are open 24 hours a day.
Because of this, some forms of technical analysis that factor in time have to be modified so that they can work with the 24 hour FOREX market. Some of the most common forms of technical analysis used in FOREX are:
* The Elliott Waves
* Fibonacci studies
* Parabolic SAR
* Pivot points
A lot of technical analysts have a tendency to combine technical studies to make more accurate predictions on your behalf. (The most common method for them is combining the Fibonacci studies with Elliott Waves.) Others prefer to create trading systems in an effort to repeatedly locate similar buying and selling conditions.
Choosing Your Strategy

Most successful traders will develop a strategy and perfect it over a specific period of time. Some people will focus on one particular study or calculation, while still some others use broad spectrum analysis as a means of determining their trades. Most experts would likely suggest that you try using a combination of both fundamental and technical analysis, with which you can make long-term projections and also determine entry and exit points. Of course, in the end, it is the individual trader who has to decide what works best for him.
When you are ready to get started in the FOREX market, you should open a demo account and paper trade so that you can practice until you can make a consistent profit. Many people who fail have a tendency to jump into the FOREX market and quickly lose a lot of money because of a lack of experience. It is important to take your time and learn to trade properly before you start committing capital.read more....

You also need to be ale to trade without emotion. You can't keep track of all stop-loss points if you don't have the ability to execute them on time. You must always set your stop-loss and take-profit points to execute automatically, and don't change them unless you absolutely have to. Make your decisions and stick to them. Otherwise you will drive yourself and your brokers crazy.

You should also realize that you need to follow the trends. If you go against the trend, you are just messing with your money because the FOREX market tends to trend more often than anything else and you will have a higher chance of success in trading with the trend.
The FOREX market is the largest market in the world, and every day people are becoming increasingly interested in it. But before you begin trading, make sure your broker meets certain criteria, and take the time to find a trading strategy that works for you. read more........

Forex Trading: The Perfect Forex Trading System

Trading the Forex market has became very popular in the last few years. But how difficult is it to achieve success in the Forex trading arena? Or let me rephrase this question, how many traders achieve consistent profitable results trading the Forex market? Unfortunately very few, only 5% of traders achieve this goal. One of the main reasons of this is because Forex traders focus in the wrong information to make their trading decisions and totally forget about the most important factor: Price behavior.
Most Forex trading systems are made off technical indicators (a moving average (MA) crossover, overbought/oversold conditions in an oscillator, etc.) But what are technical indicators? They are just a series of data points plotted in a chart; these points are derived from a mathematical formula applied to the price of any given currency pair. In other words, it is a chart of price plotted in a different way that helps us see other aspects of price. read more....

There is an important implication on this definition of technical indicators. The fact that the readings obtained from them are based on price action. Take for instance a long MA crossover signal, the price has gone up enough to make the short period MA crossover the long period MA generating a long signal. Most traders see it as "the MA crossover made the price go up," but it happened the other way around, the MA crossover signal occurred because the price went up. Where I'm trying to get here is that at the end, price behavior dictates how an indicator will act, and this should be taken into consideration on any trading decision made.

Trading decisions based on technical indicators without taking price action into consideration will give us less accurate results. For example, again a long signal generated by a MA crossover as the market approaches an important resistance level. If the price suddenly starts to bounce back off that important level there is no point on taking this signal, price action is telling us the market doesn't want to go up. Most of the time, under this circumstances, the market will continue to fall down, disregarding the MA crossover. learn more....

Don't get me wrong here, technical indicators are a very important aspect of trading. They help us see certain conditions that are otherwise difficult to see by watching pure price action. But when it comes to pull the trigger, price action incorporation into our Forex trading system will definitely put the odds in our favor, it will generate higher probability trades.
So, how to create a perfect Forex trading system?

First of all, you need to make sure your trading system fits your trading personality; otherwise you will find it hard to follow it. Every trader has different needs and goals, thus there is no system that perfectly fits all traders. You need to make your own research on various trading styles and technical indicators until you find a concept that perfectly works for you. Make sure you know the nature of whatever technical indicator used. for more informations....

Secondly, incorporate price action into your system. So you only take long signals if the price behavior tells you the market wants to go up, and short signals if the market gives you indication that it will go down.

Third, and most importantly, you need to have the discipline to follow your Forex trading system rigorously. Try it first on a demo account, then move on to a small account and finally when feeling comfortably and being consistent profitable apply your system in a regular account.read more.....